Wal-Mart to Increase Wages for Most U.S. Store Workers -- Update

By Sarah Nassauer 

Wal-Mart Stores Inc. will give nearly all of its hourly store employees a pay raise next month and not just minimum wage earners, an attempt by the country's largest private employer to combat a tighter labor market and chronic turnover.

The retailer previously announced plans to lift its minimum wage to $10 on Feb. 20, and now Wal-Mart says all hourly workers employed in stores as of Dec. 31 will get at least a 2% pay bump. The wage increases will affect more than 1.2 million employees at its Wal-Mart and Sam's Club stores.

The across-the-board pay hike is aimed at addressing concerns raised by some longtime workers, who complained about the more-generous starting wages for new hires. The company is also trying to stem defections and the amount of money it spends to hire and train new staff. Wal-Mart loses hundreds of thousands of store workers each year, a Wal-Mart executive said last October.

Minimum-wage increases took effect in 20 states last year and several of the biggest employers of hourly workers, including McDonald's Corp. and Starbucks Corp., have also lifted their starting pay. Average hourly earnings for retail workers was $14.95 in December, up 3.6% from a year earlier. With the February changes, the average full-time Wal-Mart employee will earn $13.38 an hour, the company said.

In April Wal-Mart raised its minimum wage to $9 an hour, sparking complaints from some employees that they made nearly the same as a new hire with less experience, says Judith McKenna, Wal-Mart U.S. chief operating officer. This time Wal-Mart wanted all employees to benefit at once and to clearly communicate the change, she said.

"That doesn't mean that we still won't have compression in the organization," says Ms. McKenna, referring to when rising minimum wages shrink wage differences for more senior employees. Still, last April's experience taught Wal-Mart executives that employees want to know "they will still be ahead of those who come from an entry level position," says Ms. McKenna.

To achieve one day of companywide raises, Wal-Mart will move the typical 2% annual pay increase to Feb. 20 instead of granting the increase on store workers' date-of-hire anniversary. Employees that have reached a wage cap will get a one-time payment equal to 2% of salary.

Store employees were told of the change Wednesday morning.

In October company executives said wage increases would cost about $2.7 billion over fiscal year 2016 and 2017, driving down next fiscal year's profit by as much as 12% and depressing the company's share price. The 2% wage increase is included in that figure, said Ms. McKenna.

Shares of the company were down 3.2% in recent trading, amid a broad market rout. Over the last 12 months, its shares have fallen 30%.

Lauren Weber contributed to this article.

Write to Sarah Nassauer at [e-mail]

(END) Dow Jones Newswires

January 20, 2016 15:26 ET (20:26 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.